Exam 9: The Top-Down Approach to Market, Industry, and Company Analysis

Recent studies indicate that one can earn excess returns in the stock market by forecasting unanticipated changes in the money supply.

Building permits for new private housing units are listed as a leading indicator by the Conference Board.

Stock prices move coincidentally with the economy.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) An analyst wishes to estimate the share price for Ashley Corporation. The following information is made available: Estimated profit margin = 15% Total asset turnover = 2 Financial leverage = 1.2 Estimated dividend payout ratio = 75% Required rate of return = 14% Estimated EPS = $2.50 -Refer to Exhibit 9.5. Calculate the firm's estimated share price.

Recent studies show that money supply changes have an important impact on stock price movements.

Which of the following is NOT considered a relative valuation technique?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Modular Industries currently has a 16 percent annual growth rate, while the market average is 6 percent. The market multiple is 10. -Refer to Exhibit 9.11. Determine the justified P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next five years.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information that you propose to use to obtain an estimate of year 2004 EPS for the MacLog Company. In addition, a regression analysis indicates the following relationship between growth in sales per share for MacLog, and GDP growth is % $\Delta$ Sales per share = 0.015 + 0.75(% $\Delta$ GDP) -Refer to Exhibit 9.6. Calculate the firm's level of debt for the year 2020.

Which of the following economic series are included in the Conference Board coincident indicator group?

In the U.S. balance of payments, the federal deficit and military contract awards are ____ of aggregate economic activity.

Which of the following is NOT an analytical measure used by the Conference Board to examine behavior within a series?

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The Rollerball Corporation's industry averages are as follows: Net Profit Margin = 7.5%; Total Asset Turnover = 2.2; Total Assets/Equity = 2.0 Rollerball Corporation has the following financial statements for year ending 12/31/2008. (000's omitted) -Refer to Exhibit 9.16. Calculate the return on equity (ROE) for Rollerball Corporation and the Industry. Rollerball Industry Average

If, for the S&P Industrials Index, the profit margin was 0.20 and the equity turnover ratio was 13, the ROE would be

A growth company is one whose stock is undervalued by the market.

When a firm seeks to identify itself as unique in its industry in an area that is important to buyers, it is known as a

With a differentiation strategy, a firm seeks to identify itself as unique in its industry in an area that is important to buyers.

According to Peter Lynch, a favorable attribute of a firm that may result in favorable stock performance is when a firm's product is the latest craze.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) As an economist for a research firm, you are forecasting the market P/E ratio using the dividend discount model. Because the economy has been slow for 5 years, you expect the dividend-payout ratio to be 55 percent. Long-term government bond rates are at 6 percent, and the equity risk premium is estimated to be 3 percent. Return on equity (ROE) is estimated to be 11 percent. -Refer to Exhibit 9.8. What is your expectation of the market P/E ratio?

An increase in the retention ratio will cause a decrease in the growth rate.

An offensive competitive strategy involves positioning the firm to deflect the effect of the competitive forces in the industry.